UPDATE 2-U.S. official meets North Koreans over funds

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(Adds China comment, paras 11-12)

BEIJING, March 27 (Reuters) - U.S. Treasury officials and North Korean diplomats met to work out the transfer of funds frozen in a Macau bank and smooth the way for the resumption of disarmament talks, the U.S. embassy said on Tuesday.

The U.S. delegation, led by Daniel Glaser, met the officials late on Monday in Beijing to discuss implementation of a deal in which $25 million was to be released into a North Korean account at the Bank of China.

The funds were frozen after the United States declared Macau’s Banco Delta Asia a “willing pawn” in North Korea’s illegal financial activities, a charge the owner of the bank denies.

In a move to advance six-party nuclear disarmament talks, the U.S. Treasury said it would release the funds, but the transfer — technically up to the Macau Monetary Authority, which froze the money in the first place — has not been executed. The delay caused North Korea to walk away from negotiations last week.

Complicating matters, a British firm linked to a North Korean bank with money frozen in Macau opposes the transfer of the funds to Pyongyang, and has said it will take whatever steps are needed to protect its clients’ money.

Colin McAskill, chairman of the investment advisory Koryo Asia, which is in a deal to buy a controlling stake in the North Korea-based Daedong Credit Bank, said he had written to the Macau Monetary Authority requesting a meeting and making it clear he opposed “taking Daedong’s money without its consent”.

About $7 million of the $25 million frozen in Macau belonged to Daedong and its clients, McAskill said, without elaborating.

The legal basis for transferring all the money to a North Korean government-linked bank account at Bank of China was unclear.

McAskill said on Tuesday he would take “whatever steps were deemed necessary” to protect the funds, adding he had not ruled out legal action.

“I just don’t want Daedong’s and its customers’ money to be included in that,” he said.

China’s Foreign Ministry had no information on the progress of Glaser’s visit and gave no indication of when or how the dispute over the funds might be resolved.

“The relevant parties, including China, are having discussions on the proper solution of the question,” spokesman Qin Gang told a news conference.

In Washington, the chief U.S. envoy to the talks that also group the two Koreas, host China, Japan and Russia, said the dispute over funds should be resolved “in the next couple of days”, Japan’s Kyodo news agency reported.

Christopher Hill made the comments in a speech at Georgetown University, adding that North Korea’s refusal to negotiate until the funds were transferred was a “wrong-headed decision”.